Follow up

Training costs

[Agreement]

HM Revenue and Customs v Ant Marketing Ltd

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What are wage reductions for minimum wage purposes?

Minimum wage legislation

The National Minimum Wage Regulations 2015 (SI 2015/621) permit certain deductions to be made from wages without it reducing pay for the purposes of calculating whether a worker has been paid the minimum wage (NMW). However, other deductions are treated as reducing pay for NMW purposes, meaning that a worker’s pay will then need to be topped up if it falls below the NMW following the deduction. For example:

• any deduction you’re entitled to make, or payment you’re entitled to receive, from the worker regarding the provision of living accommodation is treated as a reduction to the extent it exceeds the accommodation offset rate (currently £8.20 per day) ( reg 14(1) )
• any deduction in respect of a worker’s expenditure in connection with the employment is treated as a reduction ( reg 13(1)(a) )
• any deduction in respect of a worker’s conduct, or any other event, where they’re contractually liable isn’t treated as a reduction ( reg 12(2)(a) ).

HMRC notices of underpayment

In Commissioners for HM Revenue and Customs v Ant Marketing Ltd 2019 (see Follow up ), AML required its new staff to undertake paid induction training. Under their contract terms, if their contract then terminated within twelve months for a reason other than redundancy, they were required to repay some of the training costs, on a sliding scale, by deductions from their wages. H was the director and sole shareholder of both AML and another company, MPL, a lettings business. Some of AML’s workers were also tenants of flats owned by MPL and some had requested that their rent be deducted from their wages and paid to MPL. HMRC issued AML with notices of underpayments for 359 workers on the basis of regs 13(1)(a) and 14(1) . AML appealed to the tribunal and the case ended up before the EAT.

EAT decision

On the accommodation point, the EAT held that the term “employer” , as used in reg 14(1) , didn’t include associated companies. As the landlord of the flats wasn’t the employer, the accommodation offset rules weren’t engaged.

Pro advice. Don’t try to sidestep the rules by setting up a separate property company for staff accommodation. The EAT also commented that an employer can be deemed responsible for the “provision of accommodation” even where it’s not the landlord. In this case, HMRC’s appeal hadn’t been framed in that way so the EAT couldn’t directly consider the point.

On the training costs deduction, the EAT held that this fell within reg 13(1)(a) and so was a reduction for NMW purposes, even though it might also be an exempt deduction under reg 12(2)(a) . As the training was compulsory, it was no different to expenditure for essential uniforms. The fact the deduction was made after termination of employment, or that it was only a contingent liability, didn’t change that position.

Pro advice. The mandatory nature of the training, and the fact employment couldn’t be secured without it, was key. However, the EAT also stated that expenditure needn’t always be mandatory to be “in connection with the employment” . Take care if asking low-paid workers to sign contingent training costs agreements (see Follow up ) for mandatory training. The worker must still be left with the NMW after the potential deduction has been taken into account. The risk is less if the training is entirely voluntary.

HM Revenue and Customs v Ant Marketing Ltd

Training costs agreement